Time Stamp It: US Headed to Recession

Unemployment was interesting this morning.  In earnings parlance, it would be called a “miss”.    No doubt, the mainstream media will use the word “unexpectedly”.

Bears have been looking at the unemployment numbers over the last several months and shake their heads when the market rallies.  Bulls look at it and see the trend line on employment dropping with decent corporate earnings.

Today’s number along with other macroeconomic news tells me the US is headed unavoidably to a recession.

US Real GDP Growth data by YCharts

Bulls say the reason the numbers on unemployment missed is the sequester.  I am finding all bad economic news finds the sequester as its whipping boy.  When we head into recession, Keynesian economists will blame the sequester as well-just like they did in Europe.

Why can’t we just say the economic theory behind the bail outs and subsequent economic policy decisions to try and re-energize the economy is an utter failure?  It is.

If the above chart was the revenue stream for a startup company, I’d wonder why the line was so choppy.  It’s usually an indication of poor product/market fit.  In this case, it’s poor policy/market fit.

Europe is still in crisis.  They are masking it through machinations at their central bank and via policy. But, the unemployment rates in Europe are dismal and with the way they are treating the Cypriot banks, the path is not hopeful.

Japan is now in a binary economic mode. Either their latest effort works-or fails.  There is no gray area.  All my sources that are experts on Japan and economics tell me it’s not going to work.  Japan’s economy will go off a cliff and into the Pacific Ocean.  It won’t be pretty.

China is in trouble.  As Jimmy Chanos and others have steadfastly pointed out over the past few years, they are covering up problems and hoping that world economic growth catches up to fill in the gaps.  People wonder why the Chinese don’t deal with North Korea?  It’s the least of their problems.

Then there is the US.  Poor economic policy starting with stimulus in March of 2009 has followed through to nothing. The market is only being propped up with government spending.  It’s only good as long as the Federal Reserve buys it.  Instead of being pragmatic and shifting course. Keynesians give us the same old pablum.  More spending and higher taxes.

More spending and higher taxes is not a recipe for growth according to classical economists.  That’s what we got in the budget bill this year.  Obama’s own budget that he presented is a tax and spend classic.

The entire 2011-12 fiscal agenda at all levels of government and the Federal Reserve was committed to re-electing Barack Obama.  I am not saying data was manipulated, but when revisions of non-farm payroll come out like they did today, there might have been some fudging of counting.

Anecdotes sometimes matter.  Recently I had a conversation with a long time hedge fund manager.  It was like speaking to a mirror. I had never met him before in my life.  He is short.  Could be confirmation bias on my part-but if I look at macro factors around the world-I think being short is the right way to be.

Cheerleaders are on television today saying the equity market is the place to be.  If that’s the case, the only conclusion I can make is the big banks are not short enough yet.

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